Medical aid late joiner penalties explained

In South Africa, medical aid schemes can impose late-joiner penalties on individuals who join a medical aid scheme after the age of 35; those who have never been medical aid members, or those who have not belonged to a medical aid scheme for a specified period of time prior to April 2001.

Late-joiner fees have been put in place to compensate for potentially increased claims by people who join a medical aid scheme when they’re already older or infirm, and can range from 5% of contributions to 75%. The fees are imposed at the discretion of the medical aid company, and apply to all types of medical aid plans, including hospital plans.

How late-joiner fees are calculated

Late-joiner fees are calculated as a percentage of one’s medical aid contribution, but exclude the savings component of the contribution (where applicable). A simple equation is used to determine the late-joiner penalty fee:

Age upon application minus (35 years + years of previous cover) = Total years uncovered.

The number of years uncovered corresponds to a percentage on the following table, which is used to calculate the fee:

 Total years uncovered

Late-joiner fee

0- 4 years

5% of contribution

5 – 14 years

25% of contribution

15 – 24 years

50% of contribution

25 years or more

75% of contribution

Bear in mind that ‘years of previous cover’ excludes any cover as a dependent under the age of 21. Applicants must also be able to produce proof of cover for any period of time during which they were members of a medical aid scheme. This is known as ‘credible cover’. Without proof, any previous medical aid cover will not be taken into account.

Example:

Christine is 47 years old. She was a member of her parents’ medical aid scheme until the age of 23, and then had no medical aid cover for 7 years. At 30, she took out her own medical aid for 6 years until moving overseas, where she had medical aid that lasted for 10 years. Upon returning to South Africa, she applied to become a member of a medical aid scheme.

From the figures above, Christine’s years of credible cover amount to 8 years (age 22-23 on her parents’ plan + 6 years as the principal member of her own plan in South Africa). Remember that any dependent cover under the age of 21 is not considered credible cover, and any medical aid cover taken out overseas is also not considered credible cover in South Africa.

Therefore, using the formula to calculate Christine’s late-joiner penalty:

47 – (35 + 8) = 4.

According to the table, 4 years uncovered = 5% late-joiner penalty. Therefore, Christine would pay an additional 5% of her contributions in fees; that is, 5% more than other medical aid members.

Take another example:

Leroy is an active 63-year old retiree who doesn’t have medical aid cover. Recently, while participating in a cycle race, he suffered a heart attack, and now wishes to join a medical aid scheme. From the ages of 52 to 58, Leroy ran a large property development company where he enjoyed a medical aid benefit. However, apart from this 6-year period, he has never had medical aid cover.

His late-joiner penalty would be as follows:

63 – (35 + 6) = 22

Therefore, according to the table, Leroy would be penalised with a 50% late-joiner penalty. Should he wish to join a medical aid scheme, he would have to pay his regular contributions plus an additional 50% of these contributions to become a member.

He is also likely to be subject to certain benefit exclusions for a set period of time, due to the fact that he was diagnosed with an illness prior to joining to scheme. This means that he won’t be able to claim any benefits for the condition for a certain period of time, known as a condition-specific waiting period.

Why are late-joiner fees imposed?

Late joiner fees are governed by Regulation 13 of the Medical Schemes Act, and have been put in place to protect the funds administered by medical schemes and as a way to compensate for risk.

Age is one of the most important criteria for managing risk and predicting claims. Most people join medical aid schemes when they are young and healthy. This means that they pay a monthly contribution to their medical aid scheme, but on average, they make fewer claims against their medical aid than older members. Their contributions are thus used to help support members who, over time, have become ill or have started to require increased medical care or cover for chronic conditions.

However, if an older, unhealthier person were to join a medical aid scheme, he or she poses a greater risk to that scheme, because he or she would never have paid medical aid contributions before. Thus, the contributions of the younger and healthier members would be supporting this older member, who’d never previously contributed to the medical aid fund. This wouldn’t be fair to existing members, who’d diligently paid their fees but rarely claimed from the scheme.

Are late-joiner fees always imposed, or are there exceptions?

Late-joiner fees are imposed at the discretion of the particular medical aid in question. The scheme will assess the case and make a decision. However, because late-joiner penalties actually form part of the legislation governing medical aid cover, it’s usually the case that they will be applied if an applicant meets the criteria for the penalty.

That said, it’s always a good idea to discuss your particular circumstances with your medical aid provider. Some of the larger medical aid schemes may not assess your case individually, but smaller medical aid schemes are likely to take the time to review your circumstances. This doesn’t mean that the penalty won’t be imposed, but each case is taken on its own merit.

The earlier the better

Late-joiner penalties go to show that the earlier you join a medical aid scheme, the better. Late-joiner penalties are not applied on a once-off or temporary basis; they are permanently added to your contributions. To avoid incurring this additional expense, join a medical aid scheme when you’re still young and healthy.
If you have questions about late-joiner penalties, or wish to discuss your particular situation with a medical aid expert, contact Selfmed now. Our consultants will provide advice based on your individual circumstances, and will help you to make the right choices when it comes to taking out medical aid for you and your family.